Ethical Leadership &
Responsible Business
Doing “good” to do well - the value of values
9 September 2012
Johannesburg Augu...
Why look at ethics?
 Global business landscape
 Post-financial crisis
 Anti-bribery initiatives
 Strategic importance ...
Key findings
 Majority of

organisations have
codes and
supporting initiatives

3
© CIMA
Key findings
 An average of 80% have a code of ethics globally – and
this is reflected in different markets

4
© CIMA
Key findings
 Pressures vary across markets, perhaps reflecting
challenges in external operating environment

5
© CIMA
Key findings
 One third of respondents may feel under pressure from
colleagues or managers to compromise their
organisati...
Key findings
 For management accountants there may be specific
pressure points

7
© CIMA
Key findings
 Working with colleagues from different functional areas
within the organisation – by market

Also see: Fact...
Who has responsibility?

9
© CIMA
What tone at your top?
 The Irresponsible Leader:

more common SMEs, without
regulatory scrutiny. Oblivious or hostile to...
So what? Trust and Brand: The Value of
Values
 Edelman trust barometer 2013 showed “Crisis of Leadership”
less than 50% i...
CGMA reputation risk survey – Aug 2013
 Three quarters (76%) of global financial leaders said

their company was prepared...
CGMA reputational risk survey – Aug
2013

13
© CIMA
Dare to disagree
"Openness wont help until we develop the skills
and the talent and the moral courage to use it.
Openness ...
Ethical pitfalls
“If ... You can't be a good example, then you'll just have to be
a horrible warning.”

When individuals a...
Embedding ethics: feedback from South
Africa “under pressure” focus group

Connect with
regulatory bodies
and the law

Liv...
How can the external environment be
influenced?

Level playing field

Networks and
information sources
Leverage reputation...
Changing world
Global challenges:
 Recession, resource scarcity, poverty,
corruption, livelihoods, education, health,
con...
Key Questions... does your leader?
 Value the establishment, functioning and importance of

governance structures
 Take ...
Key findings –

Currently how relevant are the following
ethical issues to your organisation?
(ranking in brackets)

Manag...
Key findings
 Less than 20% of respondents are directly collecting or
reporting
 Overall it is just over a third of orga...
Key findings
CGMA Rebooting business: Valuing the human dimension
280 CEOs in 21 countries:


Challenge in understanding ...
The future of corporate reporting
KPMG February 2013
“As the global economy continues to
reform its financial system, one
...
International Integrated Reporting
Council


Financial



Natural capital



Manufactured





Human capital

Social ...
Profits and principles: Does there have to
be a choice
1998: Shell popularly recognised as first major company to publish ...
Post-2015 UN Development Goals
Business input


Private sector increasingly seen as
having a role in sustainable
developm...
Finance’s role?
Business input

They support sustainable decision making:

Source: Improving decision making in organisati...
Does being ethical pay?
Selection of 110 Most Ethical Companies

Rated on: Corporate
Citizenship and
Responsibility; Corpo...
Does being ethical pay?
5 year performance



S&P 500 Reporters VS Fortune 500 Reporters VS S&P 500 Equal
Weighted Index...
2011 study HBS/LBS

Impact of culture of sustainability on corporate behaviour and
performance
Compared 90 

“High Sustai...
www.cgma.org/ethics
www.cimaglobal.com/ethics
9 September 2012

© CIMA
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CIMA Ethical Leadership and Responsible Business Presentation. Aug 2013.

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In August we hosted the first in a series of Ethical Leadership Think Tanks. Our event was launched by international Guest Speaker Tanya Barman, Head of Ethics at CIMA UK.
We are sharing her presentation and research findings with you here.
Find out about other Think Tank events on our website at www.theperformancehub.co.za under the tab 'Think'.

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    1. 1. Ethical Leadership & Responsible Business Doing “good” to do well - the value of values 9 September 2012 Johannesburg August 2013 © CIMA
    2. 2. Why look at ethics?  Global business landscape  Post-financial crisis  Anti-bribery initiatives  Strategic importance of sustainability issues  Spotlight on corporate conduct from wider society  Increased regulation  Reputational risks/ brand  Employee engagement /trust  Particular role of accountants / finance professional  Operate to a code  Financial and non-financial information analysis 2 © CIMA
    3. 3. Key findings  Majority of organisations have codes and supporting initiatives 3 © CIMA
    4. 4. Key findings  An average of 80% have a code of ethics globally – and this is reflected in different markets 4 © CIMA
    5. 5. Key findings  Pressures vary across markets, perhaps reflecting challenges in external operating environment 5 © CIMA
    6. 6. Key findings  One third of respondents may feel under pressure from colleagues or managers to compromise their organisations’ standards 6 © CIMA
    7. 7. Key findings  For management accountants there may be specific pressure points 7 © CIMA
    8. 8. Key findings  Working with colleagues from different functional areas within the organisation – by market Also see: Fact or fiction – the independent business partner www.cimaglobal.com/businesspartner 8 © CIMA
    9. 9. Who has responsibility? 9 © CIMA
    10. 10. What tone at your top?  The Irresponsible Leader: more common SMEs, without regulatory scrutiny. Oblivious or hostile to “integrity” and focused on short term  The Superficial Leader: good at “talking the talk”, proficient at “brand” and marketing. No embedding of practice and can appear in all sizes of organisations.  The Responsible Leader: “walks the talk”, develops ethical culture and corporate responsibility by providing resource to build integrity and balances incentive with discipline.  The Enlightened Leader: Above and beyond. Strategically understands value add and connects dots between culture, products and services. Looking at long term business success. Andrea Bonime-Blanc, CEO GEC Risk Advisory: Ethical Corporation June 2013 10 © CIMA
    11. 11. So what? Trust and Brand: The Value of Values  Edelman trust barometer 2013 showed “Crisis of Leadership” less than 50% in credibility stakes.  Trust is no longer in company’s hands* – can’t bury bad news  Social media, consumer reviews, friends & family, media – all sources for trust  Consumers in emerging markets 4x as likely to turn to social media than in developed markets (22%:5%)  Brands co-owned by many stakeholders.  Priority to cultivate honest & collaborative relationships with consumers and wider society * Re:thinking consumption: BBMG, GlobeScan and SustainAbility report 2013 11 © CIMA
    12. 12. CGMA reputation risk survey – Aug 2013  Three quarters (76%) of global financial leaders said their company was prepared to lose profit in the short term for the sake of protecting its long-term reputation (Africa: 82%)  The same number (76%) place more focus on reputational risk today than in previous years (UK 79%)  Almost half (44%) had rejected a project that made financial sense because the reputational risk was too great (Africa: 52%) Nearly 1 in 4 (22%) organisations had experienced a reputational failure (Africa: 25%) 12 © CIMA
    13. 13. CGMA reputational risk survey – Aug 2013 13 © CIMA
    14. 14. Dare to disagree "Openness wont help until we develop the skills and the talent and the moral courage to use it. Openness isn't the end. It's the beginning.” Margaret Heffernan, author of Wilful Blindness “Leaders have lots of training in how to speak – but how much training in how to listen” Communication is two ways: 14 © CIMA
    15. 15. Ethical pitfalls “If ... You can't be a good example, then you'll just have to be a horrible warning.” When individuals act with out the long term view and ethical failures come to light the result is a loss of public trust, brand damage, impact on market value, and, often increase in regulations. © CIMA
    16. 16. Embedding ethics: feedback from South Africa “under pressure” focus group Connect with regulatory bodies and the law Live your values Confidence and Assurance Helplines Staff training Communicate, communicate, communicate Set the tone Picture credits: gmarcelo, nyealumniadvisor, UggBoy, parylo00, freeimages.co.uk, Strelka Institute photo 16 © CIMA
    17. 17. How can the external environment be influenced? Level playing field Networks and information sources Leverage reputation Picture credits: Ethisphere, gerard79, danxoneil 17 © CIMA
    18. 18. Changing world Global challenges:  Recession, resource scarcity, poverty, corruption, livelihoods, education, health, conflict, globalisation......  Does your company have a “licence to operate”? “Businesses have to change – to get off the treadmill of quarterly reporting and operate for the long-term. [They] have to recognise that the needs for citizens and communities carry the same weight as the demands of shareholders.” Paul Polman, CEO Unilever http://wn.com/Unilever_Value_Chain 18 © CIMA
    19. 19. Key Questions... does your leader?  Value the establishment, functioning and importance of governance structures  Take advice and feedback from these structures  Seek honest feedback from colleagues in an environment where staff feel comfortable challenging  Respond positively to questioning from their team  Communicate the organisation’s values clearly and take appropriate action against those who breach  Ensure there are appropriate feedback mechanisms  Lead by example.....to do as you do, not as you say! Oates & Dalmau – ASA journal, July 2013 19 © CIMA
    20. 20. Key findings – Currently how relevant are the following ethical issues to your organisation? (ranking in brackets) Managing Responsible Business: CGMA 2012 CIMA 2008 Security of information 91% 93% (1) Safety and security 88% 81% (2) Bribery 78% 75% (6) Discrimination Ranking of business issues CGMA 2011/12 75% 81% (2) South Africa Conflicts of interest 74% 76% (5) Important and very important Environmental 73% 77% (4) Security of information 88% Supply chain 72% 69% (7) Safety and security 82% Human rights 64% 55% (12) Bribery 80% Responsible marketing 64% 63% (9) Supply Chain & Conflicts of interest 77% Whistle-blowing 63% 62% (10) Discrimination 74% Fairness of remuneration 55% 65% (8) Work/life balance 53% 59% (11) Base: 20 © CIMA
    21. 21. Key findings  Less than 20% of respondents are directly collecting or reporting  Overall it is just over a third of organisations who do this and it is most likely to be larger organisations Figure 4: Does your organisation publicly report on ethical performance/corporate social responsibility (CSR)? Figure 5: Does your organisation collect management information on ethics? 21 © CIMA
    22. 22. Key findings CGMA Rebooting business: Valuing the human dimension 280 CEOs in 21 countries:  Challenge in understanding value  Clear imperative to “go way beyond the financials”  Need people equipped for this task and to develop tools Need for improvement in measuring non-financial value 22 © CIMA
    23. 23. The future of corporate reporting KPMG February 2013 “As the global economy continues to reform its financial system, one crucial element of reconstruction is being ignored. The corporate reporting model in its current form does not meet the needs of investors – and it’s becoming increasingly difficult for the model to meet the requirements of preparers, auditors, regulators and standard-setters. Now is the time to begin a wide-ranging debate about what is wrong with the current model and how to change it.” The future of corporate reporting: towards a common vision 23 © CIMA
    24. 24. International Integrated Reporting Council  Financial  Natural capital  Manufactured   Human capital Social and relationship capital  Intellectual capital 24 © CIMA
    25. 25. Profits and principles: Does there have to be a choice 1998: Shell popularly recognised as first major company to publish a Corporate Social Responsibility report. This was recognised as a response to Brent Spar in the UK and Ken Saro-Wiwa in the Niger Delta controversies A defining moment in push towards corporate transparency and accountability...... © CIMA
    26. 26. Post-2015 UN Development Goals Business input  Private sector increasingly seen as having a role in sustainable development  Increased number scope and depth of private-public NGO partnership  Post 2015 development agenda – private sector much more engagement  Businesses operating in developing countries should use their influence to strengthen national government systems, rather than bypassing them - strengthening global economy at national levels Photo credits: UNGC 26 © CIMA
    27. 27. Finance’s role? Business input They support sustainable decision making: Source: Improving decision making in organisations (CIMA) 27 © CIMA
    28. 28. Does being ethical pay? Selection of 110 Most Ethical Companies Rated on: Corporate Citizenship and Responsibility; Corporate Governance; Innovation that Contributes to the Public Well Being; Industry leadership; Executive Leadership and Tone from the Top; Legal, Regulatory and Reputation Track Record; and Internal Systems and Ethics/ Compliance Program Source: http://ethisphere.com/2011-worlds-most-ethical-companies/ 28 © CIMA
    29. 29. Does being ethical pay? 5 year performance   S&P 500 Reporters VS Fortune 500 Reporters VS S&P 500 Equal Weighted Index (S&P 500 EWI) Whilst there is not yet hard evidence that sustainability reporting is a cause for increased stock market return - this chart shows a potential link between sustainability reporting and stock market return. Source: Governance & Accountability Institute, visit the website and download the report 2012 Corporate ESG / Sustainability / Responsibility Reporting – Does it Matter? at www.GA-Institute.com, get in touch at info@ga-institute.com 29 © CIMA
    30. 30. 2011 study HBS/LBS Impact of culture of sustainability on corporate behaviour and performance Compared 90  “High Sustainability” organisations that have adopted a substantial number of environmental and social policies since the early to mid-1990s with  “Low Sustainability” companies that have adopted almost none of those policies.  Financial performance of the two groups is tracked for an 18-year period through the end of 2010 “Companies which have voluntarily embraced a sustainable business culture over many years “significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.” The Impact of a Corporate Culture of Sustainability on Corporate Behaviour and Performance – Eccles, Ioannou, Serafeim 30 © CIMA
    31. 31. www.cgma.org/ethics www.cimaglobal.com/ethics 9 September 2012 © CIMA
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